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This article is intended for use by Financial Advisers who: provide advice outside of Chile to clients who are habitually resident in Chile. It only applies to Old Mutual International business that is completed outside of Chile.

Taxation

Tax relief on contributions

There is no tax relief on contribution payments. Old Mutual International requires that contribution payments must be made from resources outside of Chile.

Tax on total encashment

The total encashment of the account is subject to first category tax (17% rate) as foreign sourced income and to a surtax (because the investors are Chilean resident individuals). This surtax is a personal progressive income tax with rates ranging from 0% to 40%.

Chilean residents should register their investments with the Chilean tax authority - Servicio de Impuestos Internos (SII) on its ‘Register of Foreign Investment’ to evidence the amount of capital originally invested into the bond.

For example

Contribution paid: $100,000Encashment value: $150,000

1.

Total encashment proceeds

-

contribution paid

=

Gain

$150,000

-

$100,000

=

$50,000

2.

Gain

x

first category tax (currently 17%)

=

first category tax due

$50,000

x

17%

=

$8,500

3.

Gain

x

surtax (currently 0% - 40%)

=

surtax due

$50,000

x

40%*

=

$20,000

* assuming maximum surtax rate of 40%

Theoretically, total maximum tax to pay would therefore be $28,500 ($8,500 plus $20,000).However, the first category tax is creditable against the surtax due.

Therefore the surtax due is:

$20,000 - $8,500 (ie the first category tax) = $11,500

Total maximum tax due is

$11500 + $8500 = $20000.

Tax on partial encashment

Tax is payable upon each partial encashment proportionally to the capital returned. Any gain is subject to first category tax (17% rate) and to surtax at rates ranging from 0% to 40%.

Theoretically, total tax to pay could be up to $3,800 ($1,133.33 plus $2,666.67). However, the first category tax is creditable against the surtax due.

Therefore the surtax due is:

$2,666.67 - $1,133.33 (ie the first category tax) = $1,533.34

Total maximum tax due is

$1,533.34 + $1,133.33 = $2,666.67

Tax on death

As Old Mutual International’s account is a redemption account (no lives assured), this is not applicable.

Tax on maturity

Where the account matures, the tax liability will be the difference between the contribution paid and the redemption proceeds. The first category tax is creditable against the surtax due.

Transactions within the account

There is no tax on fund switching.

Capital Gains tax

Capital Gains tax does not apply to Old Mutual International products.

Wealth tax

Wealth tax does not apply in Chile.

Inheritance Tax (IHT) and Gift Tax

Both IHT(on death of an individual) and gift tax (for lifetime gifts) exist in Chile.

These taxes apply to Chilean nationals for their worldwide assets. For foreign nationals, only their assets in Chile are subject to these taxes (which would not include a Old Mutual International account).

The IHT or gift tax must be paid prior to the transfer of the assets. The tax rates are progressive from 1% to 25%. For close relatives there may be exemptions. For distant relatives or non-relatives, a surcharge of 20% or 40% respectively may be applied to the standard tax rates.

Where an individual inherits assets either on death or by gift, the assignment of the gifts to the heir is not a taxable event for income tax purposes.

Trusts

Trusts are not recognised in Chilean Law. It is therefore up to the Chilean tax authority to decide whether a transfer into a foreign trust would constitute a gift and therefore be subject to gift tax or whether the assets remain the property of the settlor.

Payment to Chilean resident beneficiaries

Where the owner of the policy is an offshore trust and distributions are made to a Chilean resident beneficiary, there is a risk that these payments would be subject to first category tax and surtax, or gift tax.

Law of the contract

The account issued by Old Mutual International will be governed by Manx law.

Investment risk and responsibilities

There are no investment guarantees associated with our funds and, in particular, there is no guarantee of the return of capital. We offer a range of funds with varying risk characteristics.

The value of the account is determined by the value of the units of the funds to which the account is linked. We accept no responsibility for the investment performance of the funds. The value of units of the funds will depend on the performance of the assets of the funds. The value of the units can fall as well as rise. It should be noted that units and bank deposits could, in exceptional circumstances, become valueless (this could either be temporarily because of suspension, or permanently). In addition, should any assets be denominated in a foreign currency, there will be risks and fluctuations in price due to changes in exchange rates.

Depending on the assets of the funds, there may be limits on the liquidity of the assets. In the event that there are problems liquidating any assets of the funds, the company may defer any transactions involving allocation, cancellation or fund switch until such time as we consider appropriate.

By requesting investment into a particular fund, or funds, the client accepts these investment risks.

It is for you and your client to decide which funds are most appropriate for their needs. We do not give advice.

The information provided in this article is not intended to offer advice.

It is based on Old Mutual Wealth's interpretation of the relevant law and is correct at the date shown on the title page. While we believe this interpretation to be correct, we cannot guarantee it. Old Mutual Wealth cannot accept any responsibility for any action taken or refrained from being taken as a result of the information contained in this article.

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